D'Pergo Custom Guitars, Inc. v. Sweetwater Sound, Inc.

433 F.Supp.3d 227

D'PERGO CUSTOM GUITARS, INC.

v.SWEETWATER SOUND, INC.

Civil No. 17-cv-747-LM

United States District Court, D. New Hampshire.

Signed January 6, 2020

Brendan Michael Shortell, Pro Hac Vice, Gary Ervery Lambert, Lambert & Associates, Boston, MA, Juliet DeFrancisco, Pro Hac Vice, Shortell and Connaughton, Susan Winkler, Pro Hac Vice, Pierce Bainbridge Beck Price & Hecht LLP (Boston), Robert Allen, Pro Hac Vice, Pierce Bainbridge Beck Price & Hecht LLP, Los Angeles, CA, Robert J. Steiner, Steiner Law Office PLLC, Concord, NH, for D'Pergo Custom Guitars, Inc.

Edward J. Sackman, Hilary Holmes Rheaume, Matthew John Saldana, Bernstein Shur PA, Manchester, NH, John F. Bradley, Pro Hac Vice, Bradley Legal Group P.A., Fort Lauderdale, FL, Larry Barnard, Pro Hac Vice, Carson LLP, Fort Wayne, IN, Richard C. Gagliuso., Gagliuso & Gagliuso PA, Merrimack, NH, for Sweetwater Sound, Inc.

ORDER

Landya McCafferty, United States District Judge

D'Pergo Custom Guitars, Inc. ("D'Pergo") brings this suit against Sweetwater Sound, Inc. ("Sweetwater"), alleging claims of copyright and trademark infringement and violations of the New Hampshire Consumer Protection Act ("CPA"). D'Pergo alleges that Sweetwater used a copyrighted photograph of D'Pergo's trademarked custom guitar necks and headstock to promote and sell Sweetwater products on Sweetwater's website. Sweetwater moves for summary judgment on all of D'Pergo's claims. Doc. no. 111. D'Pergo moves for summary judgment on its copyright infringement claim. Doc. no. 112. The opposing party objects to each motion.

STANDARD OF REVIEW

A movant is entitled to summary judgment if it "shows that there is no genuine dispute as to any material fact and [that it] is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In reviewing the record, the court construes all facts and reasonable inferences in the light most favorable to the nonmovant. Kelley v. Corr. Med. Servs., Inc., 707 F.3d 108, 115 (1st Cir. 2013). "Where the parties file cross-motions for summary judgment, [the court] employ[s] the same standard of review, but view[s] each motion separately, drawing all inferences in favor of the nonmoving party." Fadili v. Deutsche Bank Nat. Tr. Co., 772 F.3d 951, 953 (1st Cir. 2014).

BACKGROUND¹

D'Pergo manufactures and sells custom guitars. In 2003, D'Pergo's owner, Stefan Dapergolas, created a photograph showcasing a number of D'Pergo's unique guitar necks and headstock, which D'Pergo published to its website (the "Photograph"). D'Pergo used the Photograph on its website from 2003 – 2006, after which it took down the Photograph and replaced it with professional photography.

Sweetwater is a retailer that sells musical instruments, including guitars, through its website. In 2004, Sweetwater copied the Photograph and published it on Sweetwater's website. More specifically, Sweetwater used the Photograph in its "Electric Guitar Buying Guide" (the "Buying Guide"), in the section titled "Guitar necks explained."² The end of the Buying Guide features a number of guitars from various manufacturers for purchase (not D'Pergo's), as well as a hyperlink to "Shop for Electric Guitars."

In January 2015, Dapergolas learned that Sweetwater was using the Photograph in the Buying Guide. D'Pergo later applied for and was granted a copyright registration for the Photograph from the Copyright Office.

In January 2016, D'Pergo contacted Sweetwater about the Photograph and Sweetwater removed the Photograph from its website. D'Pergo subsequently trademarked its headstock design depicted in the Photograph.

D'Pergo then brought this lawsuit in December 2017. It asserts five claims: (1) copyright infringement in violation of the Copyright Act (Count I); (2) unfair competition in violation of the CPA (Count II); (3) deceptive business practices in violation of the CPA (Count III); (4) false designation of origin and unfair competition in violation of the Lanham Act (Count IV); and (5) trademark infringement in violation of the Lanham Act (Count V).

DISCUSSION

Sweetwater moves for summary judgment on all of D'Pergo's claims. D'Pergo moves for summary judgment on its copyright infringement claim in Count I. The opposing party objects to each motion.

I. Sweetwater's Motion

Sweetwater states in its motion for summary judgment that it concedes it used the Photograph without permission in the Buying Guide. It contends, however, that it is entitled to summary judgment on D'Pergo's claims for various reasons. The court addresses each claim in turn.

A. Copyright Infringement (Count I)

"To establish copyright infringement under the Copyright Act, ‘two elements must be proven: 1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original.’ " Johnson v. Gordon, 409 F.3d 12, 17 (1st Cir. 2005) (quoting Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991) ). Once a plaintiff establishes both elements, it may seek to recover statutory damages, actual damages, and infringing profits under the Copyright Act. See 17 U.S.C. § 504.

Sweetwater does not address the elements of a copyright infringement claim in its motion. Instead, it argues that it is entitled to summary judgment because D'Pergo cannot recover damages for that claim.

As Sweetwater notes, the court held in a previous order that D'Pergo is not entitled to statutory damages because D'Pergo did not register its copyright before Sweetwater's alleged infringement began. See doc. no. 43 at 8 (citing 17 U.S.C. § 412 ). Sweetwater contends that the record evidence shows that D'Pergo cannot recover actual damages or infringing profits. D'Pergo argues that there is a genuine issue of material fact as to whether it can recover either category of damages.

1. Actual damages

In a copyright infringement case, actual damages "consist of all income and profits lost as a consequence of the infringement." Bruce v. Weekly World News, Inc., 310 F.3d 25, 28 (1st Cir. 2002). In addition, in "some cases, a hypothetical license fee is a permissible basis for determining a plaintiff's ‘actual damages’ arising from an infringement."³ Real View, LLC. v. 20-20 Techs., Inc., 811 F. Supp. 2d 553, 556 (D. Mass. 2011) ; see also 4 Melville B. Nimmer & David Nimmer, Nimmer on Copyright, §§ 14.02[A]-[B] (1999). A "reasonable licensing fee is generally computed by determining the fair market value. ‘Fair market value’ is defined as the reasonable license fee on which a willing buyer and a willing seller would have agreed for the use taken by the infringer." World Wide Video, 2009 WL 10693580, at *1 (internal citations and quotation marks omitted).

Sweetwater argues that there is no evidence in the record that D'Pergo suffered actual damages. Specifically, Sweetwater states that D'Pergo's claim for actual damages is based on a hypothetical license fee, but that it cannot recover such damages because: (1) it cannot prove that anyone would have paid for a license to use the Photograph; and (2) D'Pergo's damages expert, Jeffrey Sedlik, relies on improper calculations and assumptions to establish a hypothetical license fee.

As discussed in the court's order denying Sweetwater's motion to exclude Sedlik, see doc. no. 138, D'Pergo may offer Sedlik's opinion at trial. Sweetwater is entitled to cross-examine Sedlik about his opinion and methodology, and present the opinion of its rebuttal expert, Ellen Boughn. Because Sedlik's opinion is not excluded, the court must take it into account in ruling on Sweetwater's motion. Viewing the evidence in the light most favorable to D'Pergo, there is a genuine issue of material fact as to whether D'Pergo suffered actual damages from Sweetwater's copyright infringement. Therefore, the court denies Sweetwater's motion for summary judgment as to D'Pergo's request for actual damages for its copyright infringement claim.

2. Infringing Profits

A copyright owner is entitled to recover "any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages." § 504. "In establishing the infringer's profits, the copyright owner is required to present proof only of the infringer's gross revenue, and the infringer is required to prove his or her deductible expenses and the elements of profit attributable to factors other than the copyrighted work." Id. at (b).

The parties disagree as to the burden the Copyright Act places on a plaintiff to prove infringing profits. Sweetwater argues that the majority of courts have held that § 504(b) should not be read literally and have required a plaintiff to establish a "legally significant connection" between the infringement and a defendant's revenues before the burden shifts to the defendant to show that its profits are attributable to other factors. See doc. no. 111-1 at 9 (citing cases). It contends that this principle is especially applicable in "indirect profit" cases such as this, where the defendant is not selling the product in the infringing photograph but instead allegedly uses the photograph to increase the likelihood of the sale of another product or service. Id. at 12-14 (citing cases). Sweetwater further states that the First Circuit has not enunciated an exact standard for connecting infringement to profits, but it notes that the court in Jane Doe No. 1 v. Backpage.com, LLC, required a plaintiff to "link the display of a particular image to some discrete portion of the publisher/infringer's profits" in order to meet its burden under § 504(b). 817 F.3d at 28 (1st Cir. 2016), cert. denied, ––– U.S. ––––, 137 S. Ct. 622, 196 L.Ed.2d 579 (2017). Sweetwater contends that D'Pergo cannot show a non-speculative connection between the Photograph and Sweetwater's profits and, therefore, it is not entitled to infringing profits.

D'Pergo counters that Sweetwater overstates a plaintiff's burden under § 504(b). It notes that the First Circuit has described a plaintiff's burden under that s...